California Court Rules on Residency Issue in Insurance Case

A California appeals court ruled last week that Mercury Insurance would have to pay full benefits for a crash caused by a woman driving her mother’s car even though the woman had said she didn’t reside at her mother’s house and the Mercury policy covering the car restricted benefits for relatives who did not reside with the policyholders.

The court ultimately ruled that Mercury had to pay full benefits for the accident because the policy language was ambiguous.

The case revolved around the issue of whether the policyholder’s daughter, Lara Edelbaum, was technically “residing” with her parents at the time of a January 2008 accident. That distinction was so important because the Mercury policy included language saying coverage for a crash would be drastically reduced if the person driving the car in the accident wasn’t listed on the policy and didn’t meet one of a handful of exceptions. One of those exceptions was being a relative of the policyholder, part of the definition for which was “a person who resides with the named insured and is related to the named insured by blood.” Since Edelbaum was related to the policyholder by blood, the only question left was that of residence.

If Edelbaum had been legally residing with her parents at the time of the crash, Mercury would have to provide up to $500,000 worth of coverage for the accident. If she hadn’t been residing with them, the insurer would have to provide only up to the $30,000 worth of car insurance California drivers are required to carry to drive legally.

But the question of Edelbaum’s residence turned out to be incredibly complicated.

Edelbaum was partially living in three different places at the time of the crash: her parents’ house in Los Angeles—where she had lived exclusively for a time in 2007—a family friend’s guesthouse also located in Los Angeles and her sister’s apartment in New York.

“She divided her time between New York and Los Angeles, spending several weeks in each place,” the court wrote in its opinion. “In essence, she commuted between the two locations from September 2007 to December 2008.”

Court documents showed that Edelbaum gave conflicting information on official documents and to insurance company representatives as to where she actually lived. During a recorded phone conversation with an insurance company representative, she said she had not been residing with her parents at the time of the accident, according to court documents. In one statement, she said her address was the guesthouse and that her permanent address was her parents’ house, but then she went on in the same document to list the guesthouse as her permanent address. And in a similar statement, she listed both Los Angeles addresses and her sister’s New York address all as her place of residency at the time of the accident.

The lower court had ruled that Mercury needed to provide up to the $500,000 worth of insurance coverage afforded by the policy because Edelbaum’s parents’ house appeared to be Edelbaum’s most permanent of the three addresses.

“At the time of the accident, Lara was a woman in transition and had three residences … with two of those in Beverly Hills,” the lower court said, according to appeals court documents. After moving in with her parents in 2007, Lara “never moved out fully” but kept a foot in the door there while also staying at the guesthouse and in New York.

The 4th California District Court of Appeals noted in its own opinion that the insurance policy did not have a clear definition of “reside” but that it did give hints as to the parameters of its definition and the definition of “relative.” The policy said, for example, that children living elsewhere while attending school or participating in the armed forces would still fall under the definition of a “relative.”

“If a child ‘residing’ at college for most of the year or ‘residing’ on a military base can still ‘reside’ with his or her parents, clearly ‘reside’ does not require physical presence in the home every day,” the court wrote.

The court said that the section of the policy in question was ambiguous under the circumstances “primarily because it is unclear whether and how much of the relative’s physical presence is required in order to qualify as ‘residing’ with the named insured.”

While the court noted that there were strong arguments both for and against considering her as a resident of her parents’ house, it ultimately upheld the lower court’s opinion saying that the insurance provider would have to provide coverage up to the $500,000 limit.

About Ben Zitney

Benjamin Zitney has been covering the auto insurance industry for the past 2.5 years. Before coming to Online Auto Insurance News, he produced an extensive company history of the 30-year-old California Joint Powers Insurance Authority and worked at the Cal State Long Beach Daily Forty-Niner as a reporter, copy editor and news editor.